Britain's economy will contract by 0.4% next year, according to the Confederation of British Industry, a "significant downgrade" on June's estimate of a 1% rise in GDP.
The business lobby group called on the prime minister and chancellor to "use levers of growth to ensure this downturn is as short and shallow as possible", the Times reported.
"Stagflation" - the combination of rising inflation, negative growth and plummeting business investment - will plunge the UK into a year-long recession in 2023, according to the group.
Business investment will be particularly hard hit, according to a separate report in the Financial Times.
The CBI said it said would start to fall from the middle of next year, when an existing "super deduction" tax allowance scheme designed to boost investment will come to an end.
Business investment is expected to be 9% below pre-pandemic levels by the end of 2024, equivalent to about £5bn.
CBI director-general Tony Danker said: "[Companies] see potential growth opportunities, but a lack of ‘reasons to believe' in the face of headwinds are causing them to pause investing."
Britain's economy is forecast by the CBI to be among the weakest of the advanced nations next year. Only GDP in Germany is expected to fall at a slightly faster pace.
The CBI added that it wanted the government to "unlock" business investment with a series of regulatory changes.
These include removing the block to onshore wind, a more flexible immigration system and updating the national planning policy framework to ease restrictions around the use of land for development.
The CBI also said it wanted a permanent investment tax incentive regime, which it estimated would unlock £50bn in capital investment every year by the end of the decade.
Business investment has effectively stagnated since the Brexit vote in 2016, according to the CBI.
